On 15 December 2021, I made orders that the Plaintiff, Class Limited ("Class"), convene a meeting of its shareholders to consider a proposed scheme of arrangement and approving a scheme booklet to be distributed to its shareholders in connection with the scheme. The proposed scheme provides for HUB24 Limited ("HUB24") to acquire all of the issued shares in Class for 0.09090909 HUB24 shares for each Class share and cash consideration of $0.125 per Class share. I set out the reasons for making those orders in my judgment in Re Class Ltd [2022] NSWSC 22.
The scheme meeting was held on 31 January 2022 and approximately 99.92% of votes cast on the scheme resolution, and approximately 97.20% of Class shareholders by number present and voting, voted in favour of the proposed scheme.
At the second Court hearing on 3 February 2022, Class sought, inter alia, an order under s 411(4)(b) of the Act approving that scheme of arrangement. I made the orders sought at the conclusion of the hearing and these are my reasons for doing so. I have drawn in this judgment on the helpful submissions of Mr Lockhart who appeared for Class at that hearing.
[3]
Affidavit evidence
At this hearing, Class relied on an affidavit dated 2 February 2022 of Matthew Quinn, who is a non-executive director and chair of Class and chaired the virtual scheme meeting on 31 January 2022, which refers to the conduct of that meeting. Mr Quinn addressed that meeting in accordance with a prepared address and Class shareholders then had the opportunity to ask questions, although no questions were asked at that meeting. Mr Quinn also refers to voting at the scheme meeting and to the delivery of a poll report, which indicated that 97.2% by number of Class shareholders present and voting and 99.92% of votes cast were in favour of the scheme.
Class also read the affidavit dated 2 February 2022 of Mr Aaron Calder, who is a senior client relationship manager with Link Market Services Ltd, which addressed the dispatch of scheme materials to Class shareholders by email, post and airmail as applicable, the dispatch of a reminder to vote email, the receipt of proxy forms for the meeting and the conduct of the virtual scheme meeting. Mr Calder also referred to the poll report for the scheme meeting and observed that there was a voting participation rate of approximately 11.78% by number of Class shareholders and 67.46% of Class shares on issue at that meeting, which is higher than the participation at Class's annual general meetings held in 2020 and 2021. Mr Calder's evidence is that he did not identify any issues concerning the use or operation of the Link platform at that meeting and he was satisfied that the dispatch, meeting and voting processes were properly completed in relation to the scheme meeting.
By his affidavit dated 3 February 2022, Mr Thomas Story, who is a partner in the firm of solicitors acting for Class in the scheme, refers to registration of the scheme booklet with the Australian Securities and Investments Commission ("ASIC"), the dispatch of materials to Class shareholders, the dispatch of the reminder to vote email and the publication of an advertisement of the second Court hearing, and he indicates that no notice has been received from any shareholder proposing to appear at the second Court hearing. There was no attendance at that hearing by any shareholder seeking to oppose the orders sought by Class.
By an affidavit dated 1 February 2022, Mr Jason Entwistle, who is the director of Strategic Development of HUB 24 confirms that HUB24 Custodial Services Pty Ltd, a wholly owned subsidiary of HUB24, which is an investment manager in respect of 38,173 Class shares held for the HUB24 Superannuation Fund comprising approximately 0.03% of all Class shares in issue, did not vote those shares at the scheme meeting and did not instruct any delegated investment manager to do so. Class also tendered a letter dated 3 February 2022 from ASIC to Class which indicated that ASIC had no objection to the proposed scheme for the purposes of s 411(17)(b) of the Corporations Act 2001 (Cth) and tendered a condition precedents certificate executed by each of HUB24 and by Class.
[4]
Submissions and determination
At the second Court hearing in order to determine whether to approve a scheme of arrangement, the Court will consider whether the relevant resolutions were passed at the scheme meeting in accordance with the statutory requirements and whether the requisite procedural requirements have been satisfied and will exercise a discretion as to whether to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Ltd [2019] NSWSC 1679 ("Aveo Group") at [15]. The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved, but will have regard to shareholders' assessment of their own interests, as manifested in the voting at the meeting: Re NRMA Ltd (No 2) (2000) 156 FLR 412; (2000) 34 ACSR 261; [2000] NSWSC 408 at [85]-[86]; Re Central Pacific Minerals NL above at [13]; Re Seven Network Ltd (No 3) (2010) 77 ACSR 701; [2010] FCA 400 ("Seven Network") at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5] .
Although there is no exhaustive statement of the matters as to which the Court must be satisfied before exercising its discretion to approve a scheme, relevant matters include whether the Court's orders convening the scheme meeting have been complied with; all other statutory requirements have been satisfied, including that the scheme was agreed to by the requisite statutory majorities; the scheme members have voted in good faith and not for an improper purpose; the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone might approve it; the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; there has been full and fair disclosure of all information material to the decision; minority shareholders would not be oppressed by the scheme; the scheme does not offend public policy; and the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Seven Network above at [35]-[40]; Re David Jones Limited (No 3) [2014] FCA 753 at [3]; Aveo Group at [15]; Re Windlab Ltd [2020] NSWSC 936 at [8]-[13].
I am satisfied that the requisite procedural requirements are satisfied. The scheme booklet was registered with ASIC on 15 December 2021; the final version of the scheme booklet dispatched to Class shareholders is in substantially the same form as the version approved for dispatch by the Court on 15 December 2021; appropriate steps were taken in relation to the dispatch of the Scheme materials to Class shareholders and a "Reminder to Vote" email was sent to Class shareholders on the share register as at 23 January 2022 who had nominated an electronic email address for the purpose of receiving communications from Class, in the form approved by the Court. Mr Lockhart fairly notes that, due to an oversight, notice of the scheme meeting was not given to Class' auditor under s 249K of the Act, prior to the scheme meeting; and, after that oversight was discovered, the auditor was sent the scheme booklet and confirmed that it raised no matters of concern. I accept that this matter is a procedural irregularity under s 1322(1)(b)(ii) of the Act or an accidental omission under section 1322(3) of the Act and the meeting is validated by s 1322(2) or s 1322(3) of the Act: Re Ellerston Global Investments Ltd [2020] NSWSC 1108. The receipt of proxy forms, the collation of proxies, the preparation of a proxy report and the registration, voting and poll procedures at the scheme meeting on 31 January 2022 were properly undertaken and that meeting was properly conducted. Class subsequently published a notice of the second Court hearing, in the form provided by the orders made at the first Court hearing, in a national newspaper on 24 January 2022.
There is no reason to doubt that Class has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion, or to doubt that there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme. The factual information contained in the scheme booklet was verified in the usual way and the scheme booklet otherwise satisfies the relevant statutory requirements. In making orders to convene the meeting of Class shareholders, I was previously satisfied that the scheme was of such a nature and cast in such terms that, if it received the statutory majority at the meeting, the Court would be likely to approve it on the hearing of an application that was unopposed. The independent expert concluded that the scheme is in the best interests of Class Shareholders, in the absence of a superior proposal, Class shareholders have now approved the scheme by the requisite majorities and no shareholder or other person indicated a wish to appear or appeared at the second Court hearing to object to the scheme. I accept it would be an appropriate exercise of the Court's discretion to approve the scheme under s 411(4)(b) of the Act.
Implementation of the scheme is conditional on a number of conditions precedent being satisfied or waived, and evidence of the satisfaction or waiver of those conditions precedent (other than Court approval) was led at this hearing. As I noted above, ASIC has confirmed that it has no objection to the scheme for the purposes of s 411(17)(b) of the Act.
Section 411(11) of the Act requires, subject to s 411(12), that a copy of the Court's order approving a scheme of arrangement be annexed to every copy of the company's constitution issued after the order is made. Section 411(12) allows the Court to exempt a body from compliance with this provision or to determine the period during which it shall apply. Mr Lockhart submits, and I also accept, that there is no utility in requiring that the Court order approving the scheme be annexed to Class' constitution where that order does not bring about any change to that constitution or modify any rights of Class' shareholders or of creditors or of persons dealing with Class: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229 at 240; Re Equinox Resources Ltd (2004) 49 ACSR 692 at [22]; Re GBST Holdings Ltd [2019] NSWSC 1280 at [15]. I will make an order under s 411(12) of the Act so that there is no need for that Court order to be annexed to every copy of Class' constitution.
[5]
Orders
For these reasons, I made the orders sought by Class at the conclusion of the second Court hearing on 4 February 2022.
[6]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 14 February 2022